Lump Sum

The term lump sum refers to the method by which a benefit is paid to a Beneficiary.

In the context of death benefits, most often a lump sum refers to a one-time payment made by a Life Insurance company to listed beneficiaries on a policy.

The sum is an amount of money beneficiaries are entitled to receive upon the death of the policyholder; it is specified in the policy and often based on the policyholder's age, health, and the amount of coverage purchased.

Lump sums are designed to give immediate financial support to beneficiaries to pay for a variety of expenses incurred quickly after a death, like Funeral costs, everyday living expenses, and Debt that must be paid during Probate.

Beneficiaries who receive lump sums do not need to pay taxes on the money they receive. This is in contrast with an Annuity, a type of payment plan that provides payments over a period of time, rather than all at once, and is subject to taxes.